German Chancellor Angela Merkel Critical of Central Banks

Germany Blasts 'Powers of the Fed' (6/3/09 Wall Street Journal)

Her criticism seems to have come from nowhere, according to the article, but what she says is common sense to many fiscal conservatives and non-Keynesian economists.

"German Chancellor Angela Merkel, in a rare public rebuke of central banks, suggested the European Central Bank and its counterparts in the U.S. and Britain have gone too far in fighting the financial crisis and may be laying the groundwork for another financial blowup.

""I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line," Ms. Merkel said in a speech in Berlin. "We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years' time.""

She almost sounds like Peter Schiff.

"The public criticism is unusual -- and not only because German politicians rarely talk harshly about central banks in public. When politicians around the world do criticize their central banks, they almost always gripe that they are too tightfisted."

Instead, the German Chancellor is complaining they are doing TOO MUCH to the point of harming the economy.

Her criticism of central bankers' intervention in the economy is interesting to me. Although she was born in Hamburg (West Germany), her family moved to East Germany soon after her birth. She grew up in East Germany, under the Communist system. Then the Berlin Wall fell and suddenly it was one Germany. I would expect her to be more in favor of centralized power, or at least more at home.

You could say that it is nothing but domestic politics; the Chancellor is simply defending herself against her party's conservative critics. Probably it is. But it could also be that Germany is getting fed up with being in Euro, as their once-strong national currency (Deutsche Mark, anyone remember?) has been replaced with Euro, an artificial currency that are imposed on stronger countries (e.g. Germany) and weaker countries (e.g. Spain) as if they are more or less on the same footing. Germans may perceive Euro (and EU) and their role in it as "subsidizing" the weak countries at the expense of their own country.

It is also possible that the Chancellor and her fellow Germans remember what happens when the central bank starts printing money in large quantities (this from Ludwig von Mises Institutie site).

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